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Do You Really Want to Drive an Apple Car?

Recently I spent several hours fiddling with the audio settings on my Kia’s sound system, such as it is. I’ve had a lot of cars over the years, cheap, mid-priced and expensive, and never had the audio hardware that just worked without some manual labor to fix the tonal balance. Not once. The default settings were usually at the extremes of what I can tolerate. Car audio is notorious for boomy bass, and sizzling highs. Impressive in the showroom, but not so impressive when you have to live with those systems day in and day out.

Maybe it needs an Apple solution, but why just the audio system?

So there are reports that Apple is making a huge push into getting more involved in the auto industry. A Wall Street Journal report mentions several hundred engineers being involved in an Apple project that’s code-named “Titan,” which may be working on an electric car, shades of Tesla. There are even reports that Apple and Tesla are busy plucking employees from one another, although there’s a natural affinity in a few areas, such as advancing battery and infotainment system technology.

With $180 billion on hand in banks and investments, it’s not that Apple doesn’t have the cash to create a new car. Typically it costs an auto maker $1 billion to design a new vehicle and bring it to production, although many of the components may be lifted from other models. But they also have the factories and supply chain sourcing to turn the concept into a finished product. Apple certainly has the contract manufacturing resources to build Macs, iPhones and iPads, among other things, but not an entire motor vehicle. At least not yet.

One auto magazine, which I shall not name, suggested Apple didn’t have the engineering expertise to understand how to make the 10,000 working parts of a new car operate properly together. Other than Tesla, and there are still question marks about its long-term prospects, there hasn’t been a successful new car maker in years. It’s mostly about mergers and acquisitions, and building new versions of existing cars at various price points. So we have a fancy Toyota becoming a Lexus, or a fancy Honda becoming an Acura. It’s as much about repackaging and extending existing hardware platforms as creating new brands.

Sure, they said Apple didn’t have to expertise to build a smartphone several hundred million units ago. But that’s nowhere near as complex as selling a product that, today, has an average transaction price of $31,252. It’s not that Apple couldn’t do it, but the betting is that it would take years to accomplish.

Even if Apple were to build a new car, there’d be the matter of setting up production lines, or paying contract manufacturers to handle the chores at the start, and establishing showrooms. It couldn’t just be an expanded version of Apple Store, but a new concept in auto retailing. Apple doesn’t take the sales experience casually, and the usual car buying experience, involving endless haggling and time-wasting nonsense that takes you through several steps from sales to finance, is downright unpleasant for most of you. It is for me.

Again, Apple could surely build the best car on the planet, though you wonder how much it’ll cost to design, and overhaul the manufacturing, purchasing and service experience. There’s more than enough cash to fund such a project, and Apple does think long-term, so taking such a venture from concept to fruition wouldn’t try their patience.

But I don’t see why they need to go there. As with TVs, the auto industry is a cutthroat business, and profit margins are far lower than iPhones, iPads and Macs. Is all that pain worth the gain?

One other possibility is that Apple isn’t so much going after the motor vehicle as the motor vehicle’s dashboard, the brains. If the entire driving experience, from ignition to navigating to a vacation spot in another state, could be controlled via an Apple designed interface, that might have a sizable impact on the industry. Apple has already taken the first steps with CarPlay, which is essentially AirPlay for autos, since it lets you dock your iPhone with your car, which allows it to become the face of the infotainment system.

There have also been periodic rumors about Apple buying Tesla. Technology synergies might seem logical, with Apple gaining control over the Tesla’s sophisticated computer systems to control the entire driving experience. As the company prepares to build reasonably affordable models, such a merger might seem sensible.

It would certainly shortcut the process of entering the car market by a number of years, assuming Apple wanted to go in that direction.

As of the time I wrote this article, Tesla’s market cap was roughly $25 billion. Assuming Apple paid twice that, $50 billion, for this transaction, it would consume a sizable portion of those cash reserves, but Apple would still have $130 billion left.

The question, of course, is why would they bother? What changes would Apple have to make, if any, to make the Tesla conform to their vision of the ideal car? It’s not that Apple doesn’t buy other companies, though it’s mostly for technology, with Beats being a rare exception. But a car company is something else entirely, and I’m not altogether convince this is a sensible direction for Apple.

It may well be that Apple is planning on building some car prototypes with which to test dashboard-related technologies. That might be the true source of those rumors. At the end of the day, a new car design could emerge from this rumored project, but I wouldn’t bet the farm on such a prospect.